What’s Been Driving Whiting Petroleum’s Stock Recently?



Whiting Petroleum’s stock

Whiting Petroleum (WLL) stock has fallen 65% since the beginning of this year. WLL’s stock has largely been tracking movements of crude oil prices (UCO) (DBO) as we can see in the graph below. Crude oil prices have fallen 8.5% since the start of this year. The broader energy sector, or the Energy Select Sector SPDR ETF (XLE), which has also been tracking crude oil prices along with natural gas prices (UGAZ) (UNG) has fallen considerably this year. The XLE has fallen 17% year-to-date (or YTD). So, WLL has seen steeper declines as compared to crude oil prices as well as the broader energy sector.

The energy sector along with WLL has performed poorly compared to the broader market. The broader market of the S&P 500 SPDR ETF (SPY) has increased ~8.6% since the start of this year.

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What’s driving WLL stock?

A weak energy price environment is probably what had incited WLL to cut back on its 2017 capital spending. The company had revised its 2017 capital expenditure from $1.1 billion to $950 million. The capex in the previous year had been almost double the 2016 capex. Additionally, in August, Whiting Petroleum announced its decision to sell its Fort Berthold assets in North Dakota in exchange for $500 million in cash. The company intends to use the proceeds to pay down a major portion of its $550 million bank debt. The closing date of the transaction is expected to be September 1, 2017. Weak energy prices with a high debt level likely caused the company to take this step.

At the end of 2Q17, WLL’s long-term debt was $3.3 billion, while its current market cap is ~$1.6 billion. Despite the company having scaled back its capital and taking steps to reduce its debt, WLL’s stock hasn’t risen. A consistent increase in crude oil prices could be the only way the stock could see a turnaround. Keep watching Market Realist for weekly updates on Whiting’s stock movements.


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